The latest report of new home sales could portend choppy waters ahead for the housing market.
Released today by the Commerce Department, new home sales were down sharply in June to a seasonally adjusted annual rate of 406,000. That was down 8.1 percent from May’s 442,000 and, more importantly, down 11.5 percent from June 2013.
Not only that, but May sales were revised downward from 504,000 to 442,000 and April sales were revised from 425,000 down to 408,000.
Earlier this week, the National Association of Realtors reported existing home sales were at a seasonally adjusted annual rate of 5.04 million – up 2.6 percent from May, but down 2.3 percent from last year.
The important distinction to remember on home sales is existing sales are reported at closing, while new sales are reported at contract signing – which is often before construction begins. In effect, new home sales are “newer” data. Plus, although cancel rates have dropped since the housing crash, some of those sales will never occur.
The good news is that inventory levels are still relatively low – sitting at just under six months worth of homes on the market. Six months is considered the healthy mark.
It’s worth noting that housing starts and building permits, a good indicator of future building activity, were reported up last week.
It’ll be important to keep an eye on the next few months on both the sales and starts numbers to see how things shake out.